View more on these topics

Nick Bamford: Why Osborne’s guidance is an expensive waste of space

Nick Bamford MM 700

Do pension plan owners need guidance at retirement? I think they might well do. But what they probably don’t need is the complex and expensive guidance service being proposed by the Government.

Do they need independent, impartial advice to help them make the right decisions? I absolutely know that they do. Can they afford it? Maybe, maybe not.

But will the proposed guidance service really result in them seeking financial advice? I am totally unconvinced that they will.

The FCA Thematic review of annuities (TR14/2 – do you remember that being published just before George Osborne pulled the rug out from under the regulator’s feet?) told us 80 per cent of those who purchased an annuity from the provider of their current pension plan would have been better off shopping around.

Let’s be clear here – better off means having more income for the rest of their lives than they would have got from the provider of their pension plan.

The guidance that they really need is much simpler, and a whole lot cheaper, than the expensive debacle being forced on us by Mr Osborne.

What is needed is a warning, big, bold and in your face, a bit like on cigarette packets. This warning should be issued by pension plan providers at the point where they alert plan owners about their upcoming retirement date.

‘WARNING: not shopping around for retirement benefits can SERIOUSLY DAMAGE YOUR WEALTH!’

There is already oodles of guidance available to the consumer. It’s called the internet. And for any one who can’t access the internet there is plenty of written material available. However, better than either the internet or paper is to have a quick chat to an authorised and regulated independent financial adviser.

Despite all the suggestions to the contrary, the typical consumer does not see any difference between guidance and advice. And we know that George Osborne disingenuously exploited this fact when he announced “free face to face advice” and then squirmed out of it by claiming he really meant guidance but needed to communicate with a broad group of people.

I liked the analysis from back in May they told us: “29 per cent of consumers want a guarantee that what they are being told is right for them.”

It sounds like they want advice to me and that is what the consumer will expect when they make their call to MAS or TPAS or any of the other independent organisations who are going to support the guidance guarantee and share in the tax – sorry levy – being imposed on intermediaries

Will this result in more clients for the IFA? Highly unlikely, they just thought they had free advice regardless of what was actually said to them.

Those with substantial pension pots already seek professional advice or are confident enough to make their own decisions. Those with modest pots may well seek advice, while some are inevitably put off by the sort of costs involved in receiving that advice. But (and its a big but) the vast majority of pension plan owners are going to have very modest if not small amounts of money.

In their State of Retirement Report 2014, LV= pointed out that some 85 per cent of those buying annuities in 2012 had up to £50,000 in their pension pots. Now my working class roots tell me that £50,000 is, and always has been, a lot of money but sadly probably not enough to motivate most people to seek out independent advice.

So here’s my conclusion:

  • George, you can  prattle on as much as you like about whether advice and guidance are the same or different but the consumer absolutely believes they are the same thing;
  • the cost of this guidance guarantee service is going to be well above £50m, particularly when the likes of MAS get their claws into it;
  • IFAs will pay for this because we are a soft target and it will not result in any commercial benefit to us;

Finally, if you don’t have a financial stake in this particular game (i.e. you are not a levy payer) forgive me but I really am not interested in your opinion about whether this will generate client enquiries or not, I will spend my own marketing budget thank you very much.

Nick Bamford is executive director at Informed Choice



Lenders under fire over remortgage approvals

Brokers have criticised lenders for failing to help existing borrowers switch to a better deal after year-on-year remortgage approvals fell in June. The Bank of England last week released data showing the first uptick in mortgage approvals since January, with 108,857 approvals in June representing an 8 per cent rise from 100,451 in May. Industry commentators […]


PRA appoints UBS chief to board

The Prudential Regulation Authority has announced a raft of changes to its board, which sees UBS chief executive Mark Yallop join the regulator as Bank of England director Spencer Dale steps down to join BP. Currently executive director for financial stability strategy and risk, Dale will join BP as chief economist in October. He joined […]


Will £10k annual allowance put the brakes on pension flexibility?

Whenever changes to the tax system are made, concerns about potential loopholes are never far away. Ever since the new pension freedoms were announced in March, people have warned they could lead to tax-planning opportunities. These enable National Insurance contributions to be avoided where salary is sacrificed to a pension or cash to be ‘recycled’, […]


Major banks not prepared to deal with collapse say US regulators

US regulators say a group of major global banks including UBS, JP Morgan and Barclays have not yet met demands to show how they could be unwound in the event of a crisis. The US Federal Deposit Insurance Corporation and Federal Reserve last night issued a note warning that eleven banking organisation had failed to […]

Globe - thumbnail

Considerations for overseas workers in Germany

With Germany’s strong economic growth leading the eurozone’s recovery, many UK businesses are keen to be part of the success story: recent data shows that there are currently more than 280,000* employees working for a UK-controlled company in the country.


News and expert analysis straight to your inbox

Sign up


There are 13 comments at the moment, we would love to hear your opinion too.

  1. Spot on ( as ever) Nick

  2. @Nick – But will you refuse to pay your MAS part of the levy? I know it’s not a lot, but it is probably the only thing that will get any kind of reaction from the powers that be (could result in having authorisation removed).

    If you will I will!

    I think we should be given the choice perhaps pro bon guidance meetings OR contribute towards the levy. If I had a caste iron guarantee I would not be dragged I front of the FOS for giving guidance, then I’d happily set aside a bit of time every month to provide “guidance” or work on a voucher system, but to pay for a bunch of quangocrats to cock up guidance BEFORE the consumer then tries coming to me AFTER speaking to them to execute a trade I disagree with. NO thanks.

  3. Well done NIck

    But what I can’t comprehend is that the Patricians think that people are responsible and should be allowed to dispose of their pension fund as they see fit.( After of course contributing to an estimated extra £4 billion in Tax – today’s Daily Telegraph). But they cannot be trusted to save in the first place – so are being dragooned into a third rate pension offering labelled AE.

    It would seem that tinkering with pensions is now a more popular sport than cricket.

  4. @ Philip I sometimes think that withholding might well be the only solution but if I withhold my MAS levy that could result in enforcement action against my firm and I have my clients and staff to think about.

    So I don’t know what the answer is but we can all use the collective voice this paper gives us to make sure that Government and Regulator knows that we think very badly of this. As others have said we all need to be responding to the FCA consultation paper and pointing out via a reasoned argument that the IFA community is not going to be the beneficiary of this guidance service and thus should not be paying for it.

    Decisions such as charging the levy to IFAs must be evidence based and as the evidence doesn’t exist that should be the end to it

    The guidance service is a service for the public good so let the taxpayer pay for it

  5. @Harry Freedom and choice in pensions was a clever way to exploit the current negative consumer mood towards annuities and bring forward the income tax take. The Chancellor was very clever with this move.

    India all out for 152 as I type this so Cricket still marginally more interesting than pensions 🙂

  6. ……”Patricians think that people are responsible and should be allowed to dispose of their pension fund as they see fit”.

    And many of these will be the same people that the powers that be say don’t understand what 1% is without being told that it’s £1 in every £100. That’ll be interesting then……..

  7. Nick, I fear your concern about the cost of delivering the service is well founded. You only have to look at the FCA consultation paper on the standards required of the guidance providers, i.e. MAS and TPAS.

    They are, in effect, the same as a regulated firm and cover:

    Delivery of the guidance – consistent and good quality using due skill, care and diligence

    Professional standards – those delivering the service are competent and have sufficient knowledge and expertise

    Communications – due regard to the needs of consumers and be clear, fair and not misleading

    Systems and controls – establish as appropriate to the standards as well as it’s operations more generally

    Complaint management – establish appropriate system to investigate and the Treasury will determine an adjudicator function independent of the providers (with a longstop I wonder?!)

    Guidance input – delivery partners must agree information requested in guidance sessions

    Content of guidance session – seven steps too long to list here but effectively the ‘agenda’ to follow

    Next steps – signpost the consumer to further info, advice or relevant support

    Guidance output – consumer receives a record of their guidance session

    Does anyone think this will come cheap or can be delivered for £50M? And if the FCA are going to oversee this then perhaps MAS and TPAS should be afraid…

  8. Peter Blackburn 7th August 2014 at 5:10 pm

    Good stuff Nick. Well put.

    So, how do we stop being such a soft target for all and sundry?

    Perhaps, given yesterdays social media paper, we can start by tweeting that we subsidise MAS and the FSCS. That’s clear, fair and not misleading.

  9. Well if we are to pay and there is no escape then why can’t we have a say in the remuneration structure at the very least and have oversight and input to their accounts and expense?

    I always thought that he who paid the piper….

    But then having just got my FCA bill I can see that it is perhaps no longer a trueism!!

    Mind you much as I feel you are perfectly right in principle, as a sole trader I see that my contribution to these clowns is only £10 – hardy worth my while even dictating this post! (Yes Phil – another case of pragmatism over principle).

  10. Hit the nail on the head. With a looming all-powerful EU Super-Regulator determined to make an impact, we can expect further drains on our income. What will it take for the industry as a whole to simply say ‘No’. Who has a sufficiently noticeable profile (Nick?) to galvanise not just the IFA community but the providers. This fee-gobbling train is not going to stop.
    Incidentally, Nick, you are not wrong to refer to the levy as a Tax. Have you looked at the breakdown of government department spending recently? There is an item in there for the FSA in the 2012 set of figures (£490m in 2011/2102). If the revenue for the FSA/FCA is classed as government spending, then our levies should be classed as an additional tax on our turnover (not our profit). Just work out what that means to your total rate of tax on profits!

  11. @ Peter Blackburn

    I think you have hit on a terrific idea. I’m not a social media type – but go for it.

    However I would be willing to make a contribution of (say) £50 if everyone else (or at least a significant number) joined in. We could perhaps then take out a full page in some of the dailies telling it how it is. That would really stick it to them! (Don’t you think??)

  12. As ever it is convenient for both the regulator and the Govt to dilute the message that advice is both worthwhile and has to be paid for somehow.

    The current mania for ‘simplified products’ has morphed into a mania for ‘simplified advice’ and one could be forgiven for believing that there is a thrust for removing intermediation.

    Don’t worry though, if this happens there is always another quango for the disenfranchised regulators to lock on to.

  13. @ Peter Blackburn good idea

    I have just tweeted “Everyone in the “Twitter world” needs to know that @YourMoneyAdvice is paid for by the Financial Services industry not Government”

    Immediately re-tweeted by @YvonneGoodwin

    Let’s all tell the consumer what is really going on!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm